Charts of the Week: Commodity Correction Develops as Anticipated

May 8th, 2011
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 cci-wikiposit-5-6-2011     by Erik McCurdy

  Caption graph from

The violent retracement in the Continuous Commodity Index (CCI) that we have been expecting developed this week with the index declining 8% and moving well below support at the lower boundary of the uptrend from June 2010.  Two weeks ago, our GEI Investing article entitled "Commodities Correction Coming" suggested that a violent overbought correction was becoming more likely. Although the long-term uptrend was relatively healthy at the time, it had been rising at an unsustainable rate for many months and technical indicators had begun to issue warning signs, suggesting that the rally was losing strength. This week, the CCI experienced the largest decline since late 2008.

Follow up:


Price behavior and technical indicators experienced meaningful breakdowns on the weekly chart, suggesting that the index is likely beginning a multi-week correction. On the monthly chart, the index has moved well below support at the lower boundary of the power uptrend from June 2010, signaling a likely return to long-term uptrend support in the 570 area sometime during the next few months.


A breakdown following an extended unsustainable rise is usually accompanied by a surge in volatility, so be prepared for violent short-term swings as the retracement develops.


 Erik McCurdy is the senior market technician for Prometheus Market Insight and has been analyzing charts every day for over 15 years. The software program that he developed to monitor long-term stock market trends has correctly predicted over 90% of the long-term turning points in the S&P 500 index since 1940. His Gold Currency Index has predicted every major trend change in the US gold market since its creation in 2005. The Prometheus Market Insight newsletter service provides daily, weekly and monthly forecasts for stocks, bonds, currencies, commodities and precious metals using proven computer models that base their predictions on technical and cycle analysis.  Stay in touch:  Email:

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